Bitcoin RSI Plunges To 'Oversold' Level Not Seen Since $60K, Signaling Potential Short-Term Recovery

Following a sharp decline in Bitcoin’s BTC/USD price, a key metric has hit its lowest level in several months, leading to expectations of a short-term recovery. At the time of writing, BTC was down to $94,794.64, as per Benzinga Pro.

What Happened: The relative strength index (RSI) for BTC, a widely used metric for determining the strength of a trend, has plunged to “oversold” levels, CoinTelegraph reported on Wednesday. The RSI fell from a high of 81.7 on Jan. 6 to a low of 16.6 on the hourly chart, marking a rapid shift from “overbought” to “oversold” in just 24 hours.

Such a low RSI level was last seen when Bitcoin was trading at $60,000. This has led traders to anticipate a short-term rebound in the BTC price, as historically, Bitcoin has often spent extended periods in “overbought” territory during bull markets.

Despite hitting new lows on Jan. 8, the RSI contrasted with the spot price downtrend, a deviation that typically precedes a price rebound. This has led traders to suggest that the BTC price is due for an upward relief bounce.

Why It Matters: The recent drop in Bitcoin’s RSI comes amidst a period of significant activity in the cryptocurrency market. Leading Bitcoin miners in the U.S. are accumulating BTC as a buffer against growing competition and narrowing profit margins. These miners have leveraged Bitcoin’s soaring price to raise over $3.7 billion since November, which has been used to fund Bitcoin purchases.

Meanwhile, Tesla and SpaceX CEO Elon Musk has predicted a potential drop in cryptocurrency prices if dollar inflation is addressed. Musk suggested that if inflation and government overspending were curbed, the price in dollars to buy cryptocurrency would actually drop, emphasizing that “what matters is the ratio of dollars to cryptocurrency.”

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Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.

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